Download North Carolina Fixed Income Fund

North Carolina Fixed Income Fund
First Quarter 2017
Fund Fact Sheet
DESCRIPTION/OBJECTIVE
Key Facts
PLAN SPONSOR:
State of North Carolina
PLAN ADMINISTRATOR:
North Carolina Supplemental
Retirement Board of Trustees and North Carolina Department of
State Treasurer
FUND CATEGORY:
Fixed Income – Intermediate-Term Bond
PRIMARY BENCHMARK:
NET ASSETS:
Bloomberg Barclays U.S.
Aggregate Bond Index
$676.88 Million
INCEPTION DATE:
03/06/2009
NET EXPENSE RATIO:*
0.23%
Annual Performance
2016
2015
2014
2013
2012
Fund
Primary
Benchmark
4.02%
0.75%
5.25%
-1.28%
7.57%
2.65%
0.57%
5.96%
-2.02%
4.21%
The North Carolina Fixed Income Fund (the “Fund”) is offered exclusively for public employees of the state of North Carolina. Effective
1/1/2016, the Fund is held in a group trust and you own units of the group trust. The Fund invests in two complementary, but independently
managed underlying funds (“Underlying Funds”). By employing two Underlying Funds, this Fund offers improved diversification compared
to having a single investment manager. Allocation decisions and the selection of the Underlying Funds are made by North Carolina
Supplemental Retirement Board of Trustees. The Underlying Funds are:
■ The TCW Core Plus Bond Fund* (50% of Fund assets) is advised by Trust Company of the West (TCW). TCW utilizes a value-oriented
approach and applies fundamental research to identify fixed income securities whose market prices do not reflect fair value. The investment
team compares relative value across all sectors of the fixed income market including U.S. Treasuries, Agencies, Mortgage-Backed Securities
and Corporate Bonds, including High Yield Bonds. The portfolio’s duration is determined by TCW’s fundamental economic outlook, which is
developed by analyzing long-term economic trends, credit trends, commodity price cycles, and the political environment.
■ The Prudential Core Plus Bond Fund (50% of Fund assets) is advised by Prudential Trust Company. The objective of the Fund is to
outperform the Bloomberg Barclays U.S. Aggregate Bond Index (the "Benchmark") by 150 basis points over a full market cycle. The
Prudential Core Plus Bond Fund seeks an excess return over the Bloomberg Barclays U.S. Aggregate Bond Index. The strategy aims to
generate excess return from top-down sector allocation and bottom-up subsector/security selection. Duration and yield curve are tactically managed. The strategy actively allocates to both benchmark and non-benchmark sectors, with heavy emphasis on the credit-oriented sectors.
The Fund seeks to provide income. There is no assurance the objective will be met.
The inception date noted for the Fund in Key Facts is the inception date for the insurance company separate account.
Multi-Managers: JPMorgan Asset Management, LLC; PGIM, Inc.
Fixed Income investments are subject to interest rate risk in which their value will decline as interest rates rise.
Performance (%)
As of 03/31/2017
North Carolina Supplemental Retirement Board of Trustees is
solely responsible for: (1) the selection of the Fund and its
Underlying Funds (including the selection of the asset allocation
percentages for each underlying fund); (2) decisions to offer Fund
in the Plan; and (3) the selection, monitoring and replacement of
the Fund and its Underlying Funds, and if applicable, the Fund’s
investment advisor(s).
Fund
Primary Benchmark
Prudential Retirement's Role. As of 1/1/2016, PRIAC acts
solely as a record keeper in providing administrative service
in connection with these plan investments. PRIAC or an affiliate thereof, is not the issuer of the group trust and is not
responsible for the management or the design of the plan
investments.
Performance Calculations/Fund Fees Reflected In Performance. As noted above, effective 1/1/2016 your Plan began
investing in units of a group trust. All performance results after 1/1/2016 reflect the performance of the accounts within
the group trust, including the deduction of an investment management fee of 0.16% and an operating fee of approximately 0.03% (inclusive of an administrative fee of 2.5bp and custodial fees). The plan charges a separate $31 annual
recordkeeping and communications fee that is not reflected in performance. Due to rounding, the Total Estimated
Expense may appear overestimated even though it is not.
*ACCOUNT NOTE:
Beginning January 3, 2017, the TCW Core Plus Bond Fund (50% of
fund assets), advised by Trust Company of the West (TCW), replaced
the JP Morgan Core Bond Fund, advised by JP Morgan Asset
Management.
Prior to 1/1/2016, the Plan invested in units of an insurance company separate account established on 3/6/2009. The
North Carolina Fixed Income Fund was offered as an investment option under a group variable annuity contract issued by
Prudential Retirement Insurance and Annuity Company, Hartford, CT (“PRIAC”). The separate account invested in
two underlying investments: (i) an insurance company separate account managed by JP Morgan with the same strategy as the underlying JP Morgan account in the group trust; and (ii) an insurance company separate account, Core Plus
Bond, managed by PGIM with the same strategy as the Core Plus Bond account in the group trust. However, the Core
Plus Bond insurance company separate account managed by PGIM experienced the following changes in management
during the periods noted: Effective 12/15/2014, Prudential Investment Management, Inc replaced Pacific Investment
Management Company, LLC as sub-advisor of the Separate Account. Performance shown below prior to 12/15/2014
reflects that of Pacific Investment Management Company, LLC. Effective January 4, 2016, Prudential Investment
Management (“PIM”) rebranded itself as PGIM to coincide with the expansion of its businesses around the world. All
performance results prior to 1/1/2016 reflect the performance of the insurance company separate account including the
deduction of an investment management fee of 0.16% and an operating fee of 0.17% (inclusive of an administrative fee
of 2.5bp, recordkeeping fee of 7.9bp and custodial fees). The separate account may have had an arrangement to recapture a portion of trade commissions that are used to offset operation expenses.
TCW utilizes a value-oriented approach and applies fundamental
research to identify fixed income securities whose market prices do
not reflect fair value. The investment team compares relative value
across all sectors of the fixed income market including U.S.
Treasuries, Agencies, Mortgage-Backed Securities and Corporate
Bonds, including High Yield Bonds. The portfolio’s duration is determined by TCW’s fundamental economic outlook, which is developed
by analyzing long-term economic trends, credit trends, commodity
price cycles, and the political environment.
Following the transition to TCW, the Net Expense will be 0.23%,
excluding TCW’s fee waiver for the first 90 days.
CUMULATIVE RETURNS
AVERAGE ANNUAL TOTAL RETURNS
Quarter
YTD
1 Year
3 Year
5 Year
10 Year
Since Inception
1.23
0.82
1.23
0.82
2.03
0.44
3.25
2.69
3.07
2.34
—
—
5.06
—
Performance Risks. Before investing, investors should carefully consider the investment objectives, risks, charges and
expenses of this Fund and other plan investment options. The performance quoted represents past performance as
described herein. The investment value and return will fluctuate so that an investment, when redeemed, may be worth
more or less than original cost. Past performance does not guarantee future results. Current performance may be lower
or higher than the performance data quoted. For performance data current to the most recent month end, please call 1866-NC-PLANS (1-866-627-5267). It is possible to lose money investing in securities.
Miscellaneous. Frequent exchanging of investment options by participant may harm long-term investors. Your plan and/or the Fund may have policies
to detect and deter potentially abusive exchanges. The policies may require us to modify or terminate investment exchange privileges. Benchmarks are
unmanaged and cannot be invested in directly. See User Guide for benchmark definitions.
For additional information about the investment options available through your plan, please call 1-866-NC-PLANS (1-866-627-5267).
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